How today’s parents got squeezed out

Canada needs to address the income gap between boomers and their kids


 

Joseph Robertson/Flickr

The Occupy movement has sounded the alarm about the gap between the rich and the rest. Some of that inequality runs along generational lines.

In Canada, the economy doubled in size since 1976, producing an additional $35,000 per household in 2010 dollars. But despite this prosperity, the standard of living for the generation raising young kids has declined. Household incomes have stalled for young couples, even though far more women contribute employment income than in previous generations. And with stagnant incomes they must pay housing prices that rose by 76 per cent, after inflation, in the last 35 years.

While the generation raising young kids is squeezed for time at home, squeezed for income after housing, and squeezed for services like child care, the generation about to retire is doing far better. Compared to retirees in the 1970s, household incomes for baby boomers are up 18 per cent, and they have more wealth because the value of the housing market nearly doubled over their adult lives. As their personal finances improve on average, boomers have left larger fiscal and environmental debts than they inherited.

This is a bad deal. Canada no longer works for all generations. While we shouldn’t fixate on blaming boomers, we will only address this gap by tackling the inherent intergenerational tension.

This requires revisiting our policy legacy. By 1970, Canada had spent a century building public schools and universities, veterans’ benefits, workers’ compensation, unemployment insurance. We built the Canada Public Pension Plan, and the Canada Medical Care Act.

But what have we built since?

When it comes to policies designed to help the current generation of young parents, UNICEF ranks Canada towards the bottom among industrialized countries.

The only solution is for that generation to demand a New Deal for Families, and for boomers to champion this better deal on behalf of their children and grandchildren.

Taming the real estate market is tricky. But we can change the fact that young couples give up income equivalent to a second mortgage when parents take turns staying at home with a newborn for a year. We can change the fact that childcare services cost the equivalent of yet another mortgage. Other countries already do.

Germany and Sweden enable dads and moms to share a year at home with a newborn age three months to fifteen months without reducing disposable income compared to the year before the child’s birth. The same couple in most Canadian provinces forgoes around $15,000 after-tax, even when using parental leave.

New Zealand invests twice as much as Canada in regulated childcare and kindergarten services. Sweden three times more, and Denmark nearly four times.

Employment norms in Canada see the typical employee work 300 hours more per year to earn roughly the same average income as the typical Dutch, Norwegian and German worker. That’s more than eight weeks, which leaves considerably less time to be home with family.

Clearly, Canadians could prioritize differently if family really is at the heart of our values. We could build new mom and dad benefits, $10 a day childcare services and flex time to ensure the generation raising young kids has enough time at home and enough access to affordable quality childcare services. Then juggling toddlers and mortgages wouldn’t put such a strain on young wallets.

Paul Kershaw is a farmer morning and night. By day, he is a professor of public policy at the University of British Columbia, public speaker, volunteer and media contributor. He blogs at: blogs.ubc.ca/newdealforfamilies


 

How today’s parents got squeezed out

  1. See, we KNOW how to fix our problems….we just don’t do so.

    • In an age of uncertainty, I am relieved that at least one person has ALL the answers. 

      • LOL oh rubbish…we all know how to fix these things, we just don’t do it for one reason or another. Ideology, religion, sheer cantankerousness……

  2. I wish we had fewer left wing profs extolling the benefits of socialism because they actually don’t exist. How is people putting their hands in other people’s pockets to pay their child care bills going to help people get ahead? 

    We are going to raise taxes on everyone, not create as many spaces as needed, the middle classes will take all available spots and poor people will get elbowed aside while expected to pay taxes. 

    And how about some evidence that strangers, not parents, looking after young children is something we should encourage because it benefits the child. 

    • I hear your complaint, Tony, I do.  But the point is that Boomers DID take advantage (by and large, not saying you specifically–if you are even a Boomer) of cheap tuition with plenty of spaces, programs and services so WE didn’t have to be saddled with our aging parents, and affordable housing.  And it seems to me we took it as our due, with nary even a thanks to the generation ahead of us that provided all this largesse.  But when the kids ask for some help, we scream LOWER TAXES as if we haven’t taken advantage of extremely low taxes throughout the bulk of our larger paying working years.  I am ashamed of us–particularly as this was the generation of peace, love, Woodstock and War protests.  Man, we suck.

    • or the Netherlands, a country that invented modern capitalism….

  3. I would like to know how old this author is. Obviously he doesn’t remember all the raw chemicals, sewage etc. that flowed freely into rivers and oceans prior to the 70’s. Maybe he missed the clearcutting and the unrestricted harvesting of whales etc. or leaded gasoline as well. You may have a grudge against the baby boomers but I don’t think you should be accusing them of leaving a dirtier world behind. The fact is our water and air are cleaner and exposure to dangerous chemicals has declined significantly since the good old days. I am getting really tired of individuals feeling entitled. Why should the children of this generation have the same lifestyle as their parents? It took their parents years to achieve what they have. Abouth the only point I agree with is that daycare could be infinitely more affordable for working parents.

    • Perhaps all children should be dropped off in the bush at birth to fend for themselves. Why should they grow up in the comforts that their parents have earned for themselves? If they’re worthy humans, they’ll survive and thrive, creating the advanced civilization that Boomers have from whole cloth. They will also avoid that offensive sense of entitlement.

      • Whole cloth?  Really?  Like, from scratch?  Come on now.  Most of the heavy lifting was done before them.  The BB’s just put it on cruise control.  

        On other matters… do you like Kermit the Frog?

        • I do, but I’m not the better-known individual ’round here with those initials – these are just those that I was given. I do like that the original Kermit puppet was made from Henson’s mother’s old coat, however.

          I most certainly don’t think that *any* generation *ever* can say that they earned what they have entirely on their own efforts. We all have a stage of greater or lesser opportunity set for us by our predecessors and we all make of it what we can.

          As an aside, I do bore of hearing about how “entitled” I apparently feel to things. I didn’t know that just wanting to know where my next pay comes from and subsequently make rent was a vast sense of spoiled entitlement.

          • So, you are retracting your “whole cloth” claim as to BB’ers unique prowess in the formation, maintenance, and expansion of civilization? 

             If the BB’ers made the best of what they were given and, as there have been no noted evolutionary changes between the generations in question, haven’t the succeeding generations also made the best of what they were given?  Wouldn’t that suggest that the BB’ers were given more and they subsequently passed on less?  Reasoning on the basis that equal effort producing unequal results is likely because of unequal endowments?  

            If the succeeding generations produce lesser results, what responsibility is borne by the BB’ers, seeing as the next generation bares the hall marks of the BB’ers handiwork?  

          • I should have been more clear in what is a failed attempt in a little snark. No generation *ever* begins from zero and whether beginning in a hole or on a hill, those previous set the stage on which they work.

            All I mean is that we’re all given what we’re given and we may (or may not) succeed at surpassing generations past. Sometimes the preceding generation leavesthe next at an advantage and others will at a disadvantage.

            Though it’s probably fair to say that we progress on the whole over time, it would probably not stand to reason that each individual generation may be able to surpass the one directly before it.

            It would also not be fair to say that any generation “owes” another anything in particular in the grand scheme of things – just that it’s nice to share in the fruits of your labour – both forward and backwards.

          • CR:
            Owes another?  Always with the profit and loss.  I don’t know about owing another generation, but surely there is a duty from one to the other & from one for the other.  Doesn’t a parent have a duty to raise a child, leaving aside questions of to what degree?  Doesn’t the younger have a duty to care for the elder?  It may not be owing, but it is obligation.  

            Anyhow, you are a good sport.  Thanks.  I get your point.

    • I am in my late twenties and I believe the problem being faced by my generation is two-fold.  We are in a vulnerable position due to inflated costs and stagnant wages, while the previous generation (the Boomers) have left us with a massive fiscal bill.

      When I look at my options most of them are bad.  The price of tuition seems higher than ever, yet post-secondary education no longer guarantees a job in which student debt can be paid off within a reasonable amount of time.  The real estate market seems to be in an inflationary bubble and any property purchase at the moment would likely end up under water in the long term (owing more on your mortgage than it’s currently worth).  As a result, rents have been spiking due to condos conversions (boomers downsizing and young people abusing low interest rates).  At best, wages seem to be stagnant.  So what is my generation supposed to do?  School is overpriced.  Home ownership is overpriced.  Rents are rising.  Wages are going nowhere.  The answer I followed is to avoid debt like the plague, but that is getting harder and harder as I get caught up in this inflationary spiral.

      The second problem is where the boomers come in.  My generation is in an extremely vulnerable position, yet, the boomers feel quite comfortable passing on their generation’s debts to less well off children in order to maintain their comfortable lives.  The boomers ran up the national debt under Trudeau in the 1970s and Mulroney in the 1980s.  The boomers have not had enough children to provide the necessary tax base to support our social safety net due to an increasing ratio of retirees to workers (retirements between 55-65 with pensions/benefits, universal medicare for seniors living 20-30 years pas working age).  This is what the boomers have left a cash strapped generation: a massive bill for their comfortable life styles. 

      • I’m a senior babyboomer….and I heard all the same complaints when we started out.

        Not enough jobs, houses were too expensive, and our country has had a debt from day one but we got the WWII expense.

        We are also passing along all the benefits of living in a free advanced 21st century nation that we have helped pay for all these years.

        You will no doubt hear the same complaints from your kids…so remember to tell them about the bennies.

        • I understand that a previous generation passing on its debts to the next is not new with the boomers.  In principle, it would be great if each generation paid as it went, but in practice that has not happened in quite some time.  However, demographic situations that existed in the past to make an unpleasant situation more bearable do not exist anymore.

          To begin with, the forefathers of the boomers generally had large families.  They provided themselves with the necessary future tax base to support their social safety net and debts.  As long as their are many more workers paying taxes into the system than those withdrawing benefits it works well.  However, the trend  towards smaller families beginning with the baby boomers has been shrinking the potential tax base.  In the future, there will be less shoulders to share the burden of the debt passed along than what the large boomer generation faced.

          Secondly, when our social safety net was put in place people did not live as long.  The retirement age was set at 65 in an age where life expectancy was drastically shorter than today.  As life expectancy increased the retirement age has not.  As such, retirees can now draw benefits for 20-30 years in system that was created during a time lower life expectancy.  Retirement at 65 is not what is was 60 years ago. 

          In summary, I understand your point about inter-generational debt being the norm; however, the demographic reality makes it much harder to deal with.  The boomers had a large tax base to pay off the debts of their shorter lived parents.  My generation does not have the necessary tax base to pay for a large generation collecting benefits 20-30 years after retirement.

              

          • This would be why we have a dept of immigration.

          • It would be “nice” if a painless solution like immigration would fix all of our fiscal/demographic problems.  It may or it may not.  While we can control who comes into Canada, we cannot control who wants to come to Canada.  Just because immigrants want to come today does not mean they will be coming tomorrow.  Immigration, at best, is an unreliable solution that we do not have full control over.  Thus, hoping for it to serve as a “magic bullet” would be irresponsible.
             
            However, we do have full control over our fiscal and social policy.  A shared inter-generational sacrifice could leave your grandchildren and the generation of my children in better shape than the boomers are leaving us.  My generation will need to accept that we will be paying taxes into a benefit system that will not yield anywhere close to the benefits received by the current retirees when we come to collect.  The situation is what it is and the money isn’t there.  However, if the boomers are willing to accept a scaling back of benefits and an immediate increase in the retirement age it would help to ease the burden.  It is a bad situation and both the boomers and their children have a big bowl of garbage to eat.  We need to eat it, otherwise an even bigger burden is waiting for the next generation.

            At best, we have indirect control over immigration, but we have direct control over tax policy and entitlement reform.  Immigration may or may not fix the problem.  If it does, that’s great and sunny days await us.  If it doesn’t, it would be nice to have put in place a sustainable fiscal framework.

          • @16cdc1470ee67d9d3eb23b4f09740595:disqus 

            Sorry, you’re not getting the pensions.

            We paid for them. Hands off.

            Immigrants aren’t  a problem….we have a ten year waiting list on them, and there are over 40M refugees wandering the planet as…well.

            We don’t have a problem, just a bunch of overactive imaginations.

        • I guess we ran out of reply room at the bottom so I had to stick this one at the top :P

          I am not denying that the boomers have contributed to the social safety net.  They have certainly paid some of the costs of their entitlement programs through taxes and entitlement contributions.  However, when you look at the size of the national debt it is clear that the bill has not been paid in full.  The boomers have certainly contributed to the tab, but a large sum remains for future generations.  What I am suggesting is to spread the pain of paying our national bill across generations.  That means everyone is likely to end up with less than they believed they were entitled too.  Why?  The tax base no longer exists to keep it running like the good old days.  Suggesting that we cram Canada full of refugees on mass is just another form of the old saying “someone else can pay for it”.  Whether they can or not is another matter.

          I do find it interesting to compare the entitlement debt left by the boomers to the war debt left to them by their forefathers.  Yes, the WW2 generation left a big debt to pay.  They also paid that debt with blood spread across Europe and the Pacific.  To compare the self-sacrificing “blood debt” of my great grandparents to the “entitlement debt” of the boomers is like comparing apples and oranges.  I would be a lot less unhappy paying off the “blood debt” of my great grandparent’s sacrifice than the debt created by unsustainable social spending.

          • No prob on the post. When you run out of room use the @ sign and then the name and it will go to the person’s mailbox

            The national debt has been with us since day one in Canada, it isn’t just from WWII…it goes up,and it goes down. Paul Martin paid off a huge chunk of it, and Harper ran it up again….but we are still well within the safe zone, so don’t worry about it. 

            There never were any ‘good ol’ days’, so there is nothing to return to. 

            We are in a transition stage….we are at about zero population growth in Canada, which is good, and gawd knows there are all kinds of immigrants and refugees we can take in. 90% of Canada is empty after all.

            Eventually everyone will arrive at the same demographic.

            In the meantime, we will pass on the debt….and the bennies. And so will your generation. And the one after that.

            There is no ‘unsustainable’ social spending. We can well afford what we have. More in fact. Canada is a very wealthy country.

          • Well, I think I better leave this post to others now.  We seem to own half the page :P  At the very least, it is good to see these issues finally being talked about more frequently.  Good debate and good night.

      • In addition to which, the boomers (of which I am a member) will be probably making increasing demands on health care and social service systems as we age en masse.

        • Boomers are from 46 to 65 so we won’t age en masse. Health costs won’t change much, and most seniors are healthy anyway.

          • Of course we won’t all age at the same moment (all waking up on one and the same morning, instantly frail and elderly). However, as a demographic cohort, we will be the largest generation of elderly the nation has seen, to date. And, agreed, the great majority of elderly people are healthy, active, and independent…until the last few months, when they are often taken down by strokes, the aftermath of falls, or the ravages of cancer, Alzheimers or other infirmities of advanced age.

            And that’s the eventuality, in larger numbers than ever before, that will be making demands on the system.

          • Yes, the last 6 months of life are the worst for some, but not all seniors…..and it will happen over 20 years.  And over 20 years medicine will change anyway.

  4. And we’re supposed to (in reality) pay for all this free stuff for people?

    • Ahem…if you pay for it, it’s not free.

      However, it covers you as well.

      • You mean of course that I will be expected to pay even more than I am paying now for services such as daycare etc. Sorry I’m tapped out now.

        • So move to Somalia and stop whining

          Freedom isn’t free…pay your taxes.

          • On the contrary, I’ve been to Somalia, and Bosnia, and Afghanistan. I know how much freedom costs and I’m tired of paying too many taxes, like I said, I’m tapped out.

          • Gee, and just awhile ago you were telling me how well off you were.

            Canadians don’t pay much tax, you’ve just been listening to the Tea party.

  5. The figures cited here put the lie to the constant bleating, especially among conservative politicians during elections, about their championing “hardworking families” (a term I have come to loathe when it crosses their lips). Most actual young families are getting it done despite the low-tax, program-slashing, small government ideology of right-of-center governments.

  6. Geez, what a surprise.  The usual prescription of more taxes and more government spending.

    The author presents an issue, then presents a totally unrelated fix.  If retirees are richer than younger generations, then you’d think the tax-loving professor would leap at the solution of taxing pensions, rrsps and other retirement income. But no, the professor would rather preserve his own future income and stick the bill with the people he purports to help.  We’ve got the usual socialist drivel about moving further towards government control of all things Canadian.  If all you’ve got is a hammer, then everything looks like a nail.

    The truth is, after decades of socialist policies like medicare, CPP and so on, and the realization that inequality is greater than ever, the rational and logical conclusion would not be more socialist policies! 

    Rather, it’s quite obvious that if you tax everybody for medical care (used promarily by the old) and you tax people for CPP pensions (used exclusively by the old), and you let the people with money escape taxes with RRSPs, and you tax the working families for EI, and you tax people for everything else you can think of (taxes fall primarily on working people and less on retirees), then of course it will be harder for younger workers, and the solution is to stop taxing them!

    But the first step would be stop taxing people to pay the salaries of socialist professors of public policy.

    • “The truth is, after decades of socialist policies like medicare, CPP and
      so on, and the realization that inequality is greater than ever, the
      rational and logical conclusion would not be more socialist policies!”

      That’s your interpretation and you’re welcome to it. But it’s not “the truth”. 

    • Geez, what a surprise.  The usual prescription of drowning govt in a bathtub.

      Then we could all be equally poor..

    • To follow on neuroticdogs observation.  RRSPs are taxed when they are withdrawn.  That is to say, when one is retired.  It is the working, younger generation getting the tax-free advantage.  But our working, younger (younger) generation can’t afford to put money into an RRSP AND pay their mortgage AND pay for child care.  Sure, they probably bought a house that was too expensive for them in the first place, and maybe they counted on gramma and grampa for the babysitting thing, just like they were babysat by gramma and grampa, but gramma and grampa said no–or moved to Florida or something.  But the house was too expensive because all the houses are too expensive, and the inequality is greater than ever only over the last two decades or so.  Which corresponds rather nicely to ” mostly after they were born”.

  7.    larouchepac dot com  —-  can save you time.

  8. Yes we need a new deal but it should not be a new deal for daycare operators. Raising a child after all is not a business or the area of expertise of government. We must empower parents directly with a universal birth bonus as in Australia and Singapore, universal maternity benefits to age 2 whatever the paid labor occupation of the parent was last year, and we must fund care of a child wherever the child is, till age 18.  The results would be that parents could choose lifestyle- sitter, nanny, daycare, grandma care, dad or mom care or taking turns or what is most common, a blend of these over the years  By such funding flexibility we’d ensure an end to child poverty, an encouragement by government to raise the birth rate for those who wish to have children but lack money and we’d value both care of kids in daycares and care at home and stop the mommy wars.  We need to value caregiving itself. Dr. Kershaw sadly seems to tilt his comments to one year at home and then daycare for the rest. It is not the lifestyle all want. Give equal funding for the range of options.

  9. “We could build new mom and dad benefits, $10 a day childcare services and flex time to ensure the generation raising young kids has enough time at home and enough access to affordable quality childcare services. Then juggling toddlers and mortgages wouldn’t put such a strain on young wallets.” Paul Kershaw

    And who pays for this, Mr. Kershaw? The government money comes from taxpayers, including those “young wallets” you seem so concerned about. Unless taxes are significantly raised, this is just shifting the money around…’robbing Peter to pay Paul’ to put it bluntly.

    “New Zealand invests twice as much as Canada in regulated childcare and kindergarten services. Sweden three times more, and Denmark nearly four times”

    New Zealand has a population of around 4 million. Sweden around 9.8 million and Denmark about 5.7 million. Canada has a population of 36 million+…which is approximately TWICE the population of all the other 3 countries mentioned added together.